Non-separability and sectoral comovement in a sticky price model

Kwang Hwan Kim and Munechika Katayama

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 9, 1715-1735

Abstract: This paper resolves the sectoral comovement problem between nondurable and durable outputs that arises in response to a monetary shock in a two-sector sticky price model with flexibly priced durable goods. We analytically demonstrate that the non-separability between aggregate consumption and labor can generate the comovement between nondurable and durable outputs in response to a monetary policy shock. We then estimate the degree of non-separability, together with other parameters, using a Bayesian approach. We find that the non-separable preferences are supported by the data and our estimated model generates the sectoral comovement in response to a monetary shock.

Keywords: Sticky price; Durable goods; Comovement; Non-separable preferences (search for similar items in EconPapers)
JEL-codes: E21 E30 E31 E32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:9:p:1715-1735

DOI: 10.1016/j.jedc.2013.04.012

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